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San Jose slips into fiscal straits: Rome to oversee plan to ease large debt.

SAND DIEGO -- A Vatican-appointed team is overseeing moves to ease the San Jose diocese's financial predicament: a $20.1 million debt due to near-quadrupling costs to refurbish its 113-year-old St. Joseph's Cathedral.

The job was originally expected to cost about 46.9 million. When costs soared to $27 million, the Vatican stepped in.

A team was formed recently to supervise efforts to solve the diocese's financial woes. Those making up the team include Los Angeles Cardinal Roger Mahony and his financial adviser, Jose DeBasa; San Francisco Archbishop John Quinn and his financial adviser, Bruce Egnew; and Orange, Calif., Bishop Norman McFarland.

NCR asked San Jose Vicar General Father Michael Mitchell, who is involved in refinancing the loan for the project, whether there were plans for the California archdioceses (Los Angeles or San Francisco or both) to cosign a promissory note that would reduce the interest rate on San Jose's debt. Mitchell said that was "not the case right now."

San Jose's debt is backed by 208 acres of prime rolling hillside that previously was the estate attached to the now-closed St. Joseph's Seminary. Estimates for the value of that land have been as high as value of that land have been as high as $35 million. However, California's real estate market is in a profound slump, and real estate land value depends also on the number of houses to be built. Mitchell declined to put a current value on the land.

Neighbors and townspeople of this Cupertino acreage have fought a plan to build 208 houses -- one house per acre. Instead, they have demanded a plan that would limit the number of houses to 40.

This limit could become policy when the Cupertino Town Council's planning department takes up the matter in June. Meanwhile, the diocese's real estate partner in the development is attempting to negotiate a greater housing density.

In 1987, when the renovation project began, it was not expected to top $7 million or to take six years. Three years later, the costs hit $17 million. Much of that overrun was attributed to a deteriorated structural fabric, including the dome and choir loft supports.

It was at that point the San Jose Mercury-News quoted San Jose Bishop Pierre DuMaine as saying during a tour of the work-in-progress: "We could have just whitewashed all this and simply torn out the insides of the church. But this building reflects a 200-year-old tradition -- not just of architecture and history but of the will and the impulse of a people to worship. I found it impossible to cut corners."

An additional three years and $10 million later, with the project $27 million in debt to Wells Fargo Bank, the Vatican appointed its team.

The diocese since has reduced the debt to $20.1 million.

Last November, strapped for cash, it sold its chancery building and moved into rented quarters. DuMaine was out of town and unavailable for comment.

What does the $20.1 million represent? At 6 percent interest, for example, the carrying charge for the $20.1 million debt would be nearly $1 million a year, or more than $18,500 a week. This breaks down to about 25 cents a week for each of San Jose's 90,000 or so Catholic families.

The diocese did not reveal its interest rates on the various portions of the loan. The current indebtedness -- "$20,100,000 and change," according to Mitchell -- represents about $220 a family. Mitchell said the refinancing may or may not leave Wells Fargo as the lead lender; other banks may be involved.
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Title Annotation:San Jose, California Diocese
Author:Jones, Arthur
Publication:National Catholic Reporter
Date:Apr 30, 1993
Words:593
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